2020 was a record-breaking year for the UK Industrial and Logistics property market with take-up hitting national record highs. And the really good news… 2021 has been remarkably strong so far too.
Despite the pandemic and the resulting contraction of GDP, the Industrial and Logistics market has been thriving, strengthening its position by rising to each and every opportunity to grow, enhance and evolve.
In this blog we’ll delve into why the sector’s performing so well, including the different threats it’s been flipping into opportunities. We’ll also share the strong performance we’ve seen here at Mounsey Surveyors, in what’s shaping-up to be another outstanding year for this market.
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Let’s start by looking at some of the extraordinary heights the industrial and logistics market reached in 2020 and the key driving factors behind the continued growth.
1. Record-breaking take-up
The industry reported that UK-wide industrial and logistics take-up in 2020 surpassed 50m sq ft, making it the highest annual total on record.
The driving forces? A portion of the increase was directly linked to pandemic-related measures, such as demand for additional warehouses for PPE supply chains. However, a plethora of growth came more indirectly through the extra demand from increased online retail activity, which prompted a lot of businesses to move forward with their expansion plans.
You may recall Amazon in particular dominating the headlines with its large expansion – but even without the additional Amazon deals, 2020 would still have been a record year. This is because demand came from a variety of sources, including supermarkets, third-party logistics and emerging ecommerce businesses.
Experts are forecasting the boom to long continue and according to Property Week 41% of occupiers anticipate requiring more space in 2021-2022.
2. A faster level-up for online retail
As mentioned, due to lockdown measures, online retail activity spiked significantly in 2020. According to the Office for National Statistics, ‘total online retailing values increased by 46.1% when compared with 2019’.
Despite the fact that this figure will likely reduce slightly as lockdown restrictions ease, the demand for logistics space is not something we see as short-term. Forecasters are predicting that the lasting impact on consumer behaviour will be a permanent boost to online retail, due to the accelerated shift in shopping behaviour – meaning there will be a long-term demand for extra industrial space.
3. Soaring investment activity
Logistics property was popular with investors before the pandemic, but after 2020 and the uncertainty in other sectors it’s become more and more desirable. On a similar upwards trajectory to take-up, investment appetite reached new highs, with experts predicting it will remain strong for the foreseeable. Commenting on the record-breaking investment activity in 2020, Property Week stated: ‘62% of agents, investors and asset managers expect investment into the sector to increase or stay the same in the next 12 months.’
4. Increase in speculative development
The anticipated disruption to construction (as a result of the pandemic) fortunately didn’t live up to initial fears – with disruption mainly occurring during the first half of 2020.
In line with booming take-up and investment trends, 2020 saw some major agreements for large scale speculative development.
2021 trends to date tell us this growth is set to continue for some time, with a strong appetite for modern, quality logistics units in the right location.
5. Efficiency trends
As businesses have been navigating both the new trading landscape following Brexit and the pandemic, many major players are taking the opportunity to restructure supply chains. With new consumer behaviours accelerated by lockdown measures, plus concerns about possible delays, a number companies have been looking to make their logistics networks more efficient and minimise potential disruptions.
To do this, many are looking for industrial and logistics space in strategic UK locations to be nearer to customers and/or to use more local suppliers. Therefore, reshoring to UK warehouses is becoming a more sought-after option than ever.
At Mounsey Surveyors, we’ve been at the heart of this significant growth, undertaking major logistics contracts in recent months.
Some of our 2021 industrial and logistics contracts (to date) include:
St Modwen Park (Stoke-on-Trent South and Central)
We were appointed to let six high-quality warehouse units for St Modwen Developments, (five at St Modwen Park, Stoke-on-Trent South, totalling 183,000 sq ft and one at St Modwen Park, Stoke-on-Trent Central, totalling 43,000 sq ft).
At the time of appointment all the properties were under development, with the final three units available for occupation in Q4 of this year.
We let all of the units to six different tenants, mostly on, or shortly after practical completion, achieving a great mix of local and national suppliers.
Following the success of the scheme, we’ve enabled St Modwen to proceed confidently, with further developments proposed and underway on both the South and Central sites, due for completion in 2021 and 2022 respectively.
North of the city, we’ve been appointed as sole agents on five warehouse units at Tunstall Arrow, totalling over 100,000 sq ft. We’re already in several discussions for these new build units which are due for completion in late Summer 2022. Nearby occupiers include DHL, JCB and Churchill China.
Quantity AND quality
We’re thrilled to be recognised and trusted for our knowledge, experience and substantial offering within the industrial and logistics market. We’re achieving fast take-up across our portfolio and have already let what’s available over the next 12-18 months, plus new units just coming on board. Overall, this equates to ½ million sq ft of industrial accommodation currently progressing, with lots more coming to market.
While our volume is high, so too is the focus on quality. Occupiers are continuing to seek modern, high-quality property, especially as they future-proof their businesses in light of the above trends.
A promising time ahead
We’re proud to be thriving in the industrial and logistics market and we’re in a great position to continue building on this success. The trends and insights we’ve discussed here show that the market is rapidly developing – moving from short-term crisis management at the beginning of the pandemic to longer-term efficiency strategies in 2021, as the lasting impacts on consumer behaviour are becoming clearer.
Quality warehouse spaces in strategic locations will be core to this accelerating growth.
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